The number of public companies in the United States is at a 40-year low; that’s good news for EquityZen, a four-year-old, New York-based company that operates a secondary marketplace for company-approved transactions in pre-IPO stock.
The 20-person firm says it has already closed more than 2,000 investments in more than 70 private firms, and Draper Associates is betting that number will grow substantially. To wit, the early-stage venture firm just led a $6.5 million Series A round in EquityZen, with participation from earlier backer WorldQuant Ventures.
EquityZen had previously raised an undisclosed amount of seed funding from 500 Startups, LaunchCapital and Projector Ventures.
Certainly, the company has been picking up momentum over the last year. According to CEO Atish Davda, EquityZen now serves 20,000 accredited investors, and roughly a quarter of those individuals joined in 2017; he also says his company has, in the first six months of this year, surpassed the transaction volume it saw in 2015 and 2016 — combined.
No doubt part of that pick-up can be tied to EquityZen reducing the check size required to invest, from what used to be $20 million to $20,000 (and it wants to get that minimum down further, Davda says).
Among those companies whose pre-IPO shares EquityZen has helped to trade are Nutanix, Veracode, Cloudera and AppDynamics. EquityZen has also helped facilitate the trade of shares of the real estate brokerage Redfin, which is currently in the midst of a pre-IPO roadshow.
Asked how the deal came together, Davda tells us he was in San Jose for a conference when he first heard from longtime VC Tim Draper — who has been focused largely on fintech in recent years — and who Davda says has “such intuition about the way things are headed; he immediately got what we were doing.”
Asked how the firm plans to invest the capital, Davda said the idea is to expand the way it services investors both within and outside the U.S. and to do as much as it can to put the private market within reach of more of the public.
EquityZen is one of numerous secondary marketplaces to flourish in recent years, as more companies have remained private for longer. Some of its bigger competitors include Industry Ventures, a San Francisco firm that has been around for 17 years, and SharesPost, an eight-year-old, San Francisco-based outfit that first made its name by helping facilitate pre-IPO sales of Facebook shares.
Other, newer outfits include Akkadian Ventures, Manhattan Venture Partners and Scenic Advisement.
Draper had himself toyed with the idea of opening a secondary market called Xchange around seven years ago, but quickly abandoned the effort.